You Be the Judge

[richiebee]

Ah, Ulaan Batar, a little taste of the old Soviet Union in the middle of nowhere...

(never been there)

Been to visit world class horseman Ghengis Khan\'s digs in Karakorum?

[TGJB]

18 months, no decision, no activity. Record for that court is 26, as far as we know.

[sekrah]

Absolutely, completely absurd that they can\'t resolve this in a more timely manner.

[TGJB]

http://opinions.kycourts.net/coa/2010-ca-000891.pdf

The Appeals Court upheld the lower court ruling.

Though I completely disagree with the ruling as to how much I am owed for my work, I am glad there is finally a clear record of what transpired. As the Court said, in the summer of 2008 I was approached by a joint venture consisting of three people, one of them Mike Lauffer, asking me to recommend a filly to purchase and to race. The joint venture asked me to send my commission rates in writing that August, which I did. Three months later I sent an email containing my data and a recommendation they purchase Rachel Alexandra, who at that point had run five times and never won a stake. Mike Lauffer then called me to discuss my reasoning. I said based on my data and analysis she was already comparable to top 2yo filly Stardom Bound, and had a brighter future. At the end of that conversation we discussed my rates, the same ones I had sent, and Lauffer indicated they would be an issue.

After that conversation, as the court said, Lauffer twice called the bloodstock agent in the deal, Don Brauer, to see whether he could avoid paying my commissions. Brauer told him that would not be ethical. Then Lauffer called me again to try to get me to reduce my rates, which I refused to do. He then called Brauer and told him the joint venture was no longer interested in purchasing Rachel. Four days later Lauffer, acting on his own, bought a half interest in her for $500,000. Six months later, after she won the Oaks, he sold his interest, netting a profit of $4.5 million. He paid me nothing.

There are several things wrong with the decision, some matters of law (as opposed to fact), which may make it reviewable by the highest state court, if they\'re willing to take it-- we\'re going to try. One of the issues is blatant-- more on that later.

[SoCalMan2]

Really stunning.  

Imagine if somebody got legal services from Wachtell Lipton and didn\'t pay the bill because they said the bill was too high.  Law suit follows -- court sees that Jacoby and Myers, Joel Hyatt, and a bunch of other random lawfirms charge 10% of what Wachtell charges for the same service so they rule that is what the bill should have been even though the customer got Wachtell as a lawyer not Joel Hyatt.  It is one of the most irrational things I have ever seen in 23 years of practicing law (9 of them as a litigator).

If this case is the law of Kentucky, why wouldn\'t anybody in Kentucky just go to the best service provider in the particular area, get the services, and then just object to the bill saying the charge should be what joe blow charges for the same services?  How on earth is this justice?  Why should Lauffers\' behavior be rewarded and used to incentivize the populace to plainly engage in wrongful conduct?

With legal reasoning like this, it is hard to believe this is the United States of America.  Our country looks more and more like a banana republic each day.

[TGJB]

Among other things, they also completely ignored the issue of imputed knowledge. They stated outright (page 7) that it was a joint venture and that I had informed them of my rates in advance-- but still said Lauffer did not know my rates, and hung the decision on that. By Kentucky law, any knowledge gained by one member of a joint venture is imputed to all.

[sighthound]

What he said.

[high roller]

Jerry - If you accepted their offer of a 5% commission - saving the money and time spent for Lawyers- you would have been way ahead.

Also a 5-5-5 commission structure on that type of high-powered deal is absurd - Your taking no risk and want to be a partner on future earnings.

The 5-5-5 deal for a small purchase works - but not for large ones. IMO

[SoCalMan2]

Am not sure how relevant the imputed knowledge is.  The concept, I think, is he got very valuable services for free.  It is not right to take something of great value and not pay for it, so he needs to pay the price that matches the services he got (i.e. the price the services merited). Haven\'t looked at this in over 20 years, but I think that is the way the concept works.

To me, what is far more relevant than the price is he knew what services he was getting for free.  

He knew he was getting a highly specialized company in NY with very good reputation.  He was not getting a dime a dozen guy that could be found in the lexington yellow pages.  The services he was trying to get for free obviously go for a higher price than the same services in the lexington yellow pages go for.  But, the court somehow thinks it is just to let a guy search the world for the best possible services, but then only pay the price you pay for a random joe from the lexington yellow pages.

Look at it from this perspective...say instead of a horse, the thing being bought was a company.  You could look for some local financial firm in Lexington to value the company you are looking at or you can hire Goldman Sachs.  Even if you do not know the prices of either service, you know that there is no way the cost of the local lexington firm is going to be in the same ballpark as the cost of Goldman Sachs.  It is ludicrous to even contemplate that.  Now, a person could say that Goldman Sach\'s services are overpriced, but that is not relevant.  the price is the price the market will bear.

If this is really the law of the land, it seems to me that you just go to the best service provider you can find and then complain the bill is too high and then say you should only pay the price charged by the average guy.  Maybe I am missing something here, but this just seems to me to be a complete sham/mockery of justice

[SoCalMan2]

high roller Wrote:
-------------------------------------------------------
> Jerry - If you accepted their offer of a 5%
> commission - saving the money and time spent for
> Lawyers- you would have been way ahead.
>
> Also a 5-5-5 commission structure on that type of
> high-powered deal is absurd - Your taking no risk
> and want to be a partner on future earnings.
>
> The 5-5-5 deal for a small purchase works - but
> not for large ones. IMO

The marketplace disagrees with you -- other clients pay the prices you call absurd.  Maybe you and they disagree, but who is to say what is reasonable and what is absurd? I think Per Se is an overpriced restaurant; does that mean the people who dine at Per Se are absurd? I wouldn\'t dine there, but I wouldn\'t say the people who do are absurd.  Would it be fair for you to walk into Per Se and just order the specials the waiter recites without asking for the prices and then when the bill comes complain that the prices are absurd and you should only pay what you pay at 3 guys diner down the block?

Your risk analysis is also suspect.  Clearly, Jerry views his services as more valuable than 5% of the purchase value of the horse, but he puts part of his fee at performance risk. Jerry could say....my services are worth 15% of the purchase price...you can either pay 15% upfront or you can pay 5% up front and the other 5 and 5 based on performance not purchase price.  I suspect most customers would prefer the 5-5-5 to a straight 15%.  In cases like Rachel Alexandra, it is much more expensive for the client (but I call that a nice problem to have).  However, there are plenty of cases where he ends up getting less than 15% of the purchase price.  You do not see Jerry as taking risk in his pricing formula because you do not think his services are any more valuable than the first 5%.  However, if you think his services are more valuable than 5% of the purchase price (which most of his customers do), then you can see he is putting his fee at risk.

In terms of what Jerry should have accepted or not accepted -- is it okay to just let a customer cheat you?  I do not know the answer to that. What about the dinner at Per Se?  If you go in and order and then balk at paying the bill, should they sue you or should they just accept the 3 guys diner prices?  What do the other diners at Per Se think seeing an a$$hole getting rewarded for being an a$$hole? If my clients paid the way Lauffer does, I would go out of business fast.  Maybe bending over and taking it is a good strategy in the way your business works, but man that would make my business almost impossible.

Also, what about common decency?  Does that have any role here?  Why should somebody be rewarded for flouting common decency?

[moosepalm]

Were these \"replacement\" judges?

Seattle beat San Francisco on a better call than this.

[Ill-bred]

TGJB-

I hope Lauffer has to pay your legal fees on top of the 5%.

[TGJB]

SoCal-- the court made imputed knowledge of the rates the big appealable issue by hanging most of their decision on the idea Lauffer did not know the rates until after I gave him the advice. I agree it should not be relevant (we argued that in the brief) since regardless, he knew them before he acted on the advice (bought the horse). But aside from that:

a) The August email (three months before the purchase) was a reply to my query of one member of the joint venture as to whether Lauffer and the third guy knew my rates. The return email from him, in evidence and discussed during the trial with three witnesses, states \"I have told them your commission (and other) rates, but it would \'seal the deal\' if you sent them to me by email reply, so that we have it clearly documented\". There is clear evidence Lauffer knew my rates, not just as a matter of law but fact. Both the trial and appeals court chose to characterize the email in their decisions, rather than quote it, leaving out the part where it says he was informed.

b) I responded with my rates, as both the trial and appeals courts acknowledged. By law, at that point knowledge of the rates is imputed to Lauffer, whether he knew them or not, simply by any member of the joint venture having them.


High Roller-- At the trial, Chris Young (Overbrook Farm), Ro Parra (Millenium), Rich Decker (Prestonwood Farm manager) and Eliot Walden (Prestonwood trainer, Win Star General Manager) all testified to their outfits using me to advise them and PAYING MY RATES. They also testified as to how that had worked out, and as a group, their outfits had spent high seven figures on horses I recommended, and turned a very substantial profit-- in an industry where expenses are $2 billion a year, purses $1 billion, and that\'s before the cost of the horses. As far as I know almost nobody shows a profit in this business over a large sample size, except my guys and some of Baffert\'s.

[high roller]

J.B. - My point is a confidential settlement with this guy would have saved you a fortune -they did an end around and got away with it

[TGJB]

Yep, at least so far.